The Mail on Sunday
Later this week VT Group VTG.L will take the unprecedented step of staging a financial presentation for predator Babcock International (BAB.L), with the aim of encouraging Babcock to up its 1.3 billion pound bid for the defence services giant. VT believes the indicative offer of between 685 and 715 pence a share undervalues the group and is reluctant to let Babcock go over its books, if only to protect the confidentiality of details of contracts for which both companies compete. The growing consensus is that Babcock will have to increase its offer to at least 750 pence a share.
Satellite broadcaster BSkyB BSY.L is considering varying its approach to charging pubs for television subscriptions. Currently, BSkyB sets a monthly fee depending on the rateable value of the pub, with an average charge of 6,000 pounds a month. However, the broadcaster is thinking about taking other factors into account when it sets charges, such as the space available for viewers or the number of customers in the pub. The British Beer and Pub Association has welcomed the move. BSkyB’s rivals, including BT (BT.L), have in the past lobbied Ofcom to investigate BSkyB’s role in pubs, but have been unsuccessful.
Cineworld (CINE.L) is set to report 2009 pre-tax profits in the region of 32 million pounds this week, on slightly higher sales of around 320 million pounds. The cinema chain benefited from strong box office sales and the showing of 3D films such as Avatar, for which it could charge a premium on ticket prices. Sales of drinks and popcorn are forecast to be eight percent up on the previous year, while due to the affects of the recession advertising revenue is expected to be down by around 30 percent, or seven million pounds.
The Sunday Times
Leo Quinn, the new boss of privatised defence group Qinetiq (QQ.L), has laid out plans for a shake-up at the company. His strategy, outlined in a series of hard-hitting emails to staff, includes cutting head-office costs by half and a cull of senior management. Quinn has also launched two internal programmes to reshape the business, in addition to a new performance management system. Qinetiq’s share price fell recently after the company issued two profit alerts in as many months. Quinn described these events as “a severe warning to us all” and warned that “staying as we are is not an option”.
The proposed sale of 320 Royal Bank of Scotland (RBS.L) branches looks less imminent after a funding deficit of three billion pounds emerged. Punitive measures were imposed on RBS by the European Commission, which instructed the sale of a network of its branches to recompense the billions of pounds of state aid it received. However, documents sent to prospective bidders show RBS’s dependency on emergency funding from the Bank of England, and that any potential buyers will have to raise about two billion pounds of capital to support the bank’s loan book. The funds given to RBS under the Special Liquidity Scheme will have to be paid back by the buyer within weeks. Thus the combination of the funding issues and the capital problem are likely to reduce the field of bidders.
HBOS (HALp.L) Integrated Finance, the bank’s collection of investments in groups such as Vue cinemas and the coffee franchise Caffe Nero, could be sold next week, with Coller Capital, which specialises in buying unsuccessful holdings, the frontrunner to acquire the portfolio. At its peak, the portfolio was worth an estimated 1.4 billion pounds, but it is now expected to sell for about 500 million pounds, with 3i understood to be the only other bidder, after Lexington Partners pulled out.
VIRGIN‘S THREAT TO FREE BANKING
Virgin Money chief executive Jayne-Anne Gadhia has announced that a fee will be levied for current accounts when the firm launches banking services later this year. Gadhia said the monthly fee would be low, and would replace high overdraft charges and requirements that customers pay in regular monthly sums. The move would make Virgin Money the first bank to charge a compulsory upfront fee for all accounts no matter how much is paid in.
Elementis (ELM.L) (Avoid)
The Sunday Telegraph
Retail group John Lewis Partnership [JLP.UL] is expected to report a rise in pre-tax profit to 315 million pounds this week. Strong full-year profits at the group, which owns department stores and Waitrose supermarket, were driven by successful Christmas sales in 2009. On Thursday, 70,000 staff who share ownership of the partnership, will hear what their bonus will be, with a payout anticipated to be 14 percent of their annual salary. On Friday, John Lewis said combined sales at its department stores and supermarkets over the week to February 27 rose by 14.8 percent, showing consumer spending remains robust.
BA DEAL “WILL FORCE UP FARES”
A proposed tie-up between British Airways BAY.L and American Airlines AMR.N will lead to customers being forced to pay more money for their airline tickets, according to Steve Ridgway, chief executive of Virgin Atlantic. Speaking in his first interview since the American Department of Transportation agreed the deal, Ridgway expressed concern over BA’s dominance in the market and that consumers would only get the best fares where there is open competition. Ridgway said: “When you’ve got an airport like Heathrow that is completely full and BA already dominates the peak slots how is there possibly an argument for them to be given more share over those markets?” Virgin Atlantic is now calling on the European Commission to block the tie-up.
UNILEVER AGREES 3.3 MILLION POUND “GOLDEN HELLO” FOR HUET
The controversy over executive pay is set to be reignited this weekend after it emerged that Unilever’s (ULVR.L) new chief financial officer Jean-Marc Huet received a “golden hello” worth 3.28 million pounds when he joined the group in February. The payments, detailed in Friday’s annual report, are intended to compensate Huet for loss of incentive with his previous employer, U.S. drug giant Bristol-Myers Squibb, and are not performance-based. Also in the annual report, Unilever said that it was adjusting the pay structure for executive directors and senior managers.
Aviva (AV.L) (buy)
Xstrata XTA.L (buy)
The Independent on Sunday
Property giant Liberty International LII.L is expected to confirm plans to split the business into two parts when it announces its results this week. Liberty is also anticipated to reveal plans to raise more cash from investors via a rights issue -- its third in two years. One leading City fund manager said that of all the listed property companies, Liberty has the greatest need for capital since it is “the least capitalised in the sector” and “needs to do something”. Should the move go ahead, analysts say the Liberty name will be dropped.
Prudential (PRU.L) chief executive Tidjane Thiam has defended his decision to takeover the Asian assets of rival insurer AIG, saying he wanted to give something back to Britain. The chief executive’s announcement comes after he has faced a wave of criticism for embarking on what opponents have labelled a risky manoeuvre. In response, Thiam has accused his critics of taking a “eurocentric view,” arguing that “Asian economies have very healthy balance sheets” unlike “more risky” leveraged economies. As Prudential obtains a dual listing of its shares on the Hong Kong Stock Exchange and London, Thiam sought to play down speculation he might offload the insurer’s UK business but admitted he cannot make a long-term pledge to keep the insurer’s head office in the UK.
Prepared for Reuters by Durrants.